What is “capitalism?”

I’m giving myself some permission to provide a definition of capitalism as I understand it, and not the absolute best definition of the word. Books have been written about the subject, and the way capitalism works has shifted a lot since the 1700’s when its foundational treatises were written by Adam Smith and his contemporaries. So the definitions I land on are going to be imperfect, incomplete, and only relevant to the present time–a different definition may be more applicable in, say, 1900 or 2100.

What is an “economy?”

First, we need to make sure we’re on the same page about what an “economy” is. The way it’s discussed can make it sound like a vast, unknowable thing that needs to be handled gingerly for fear of ruining it.

An economy is a tool. It falls into the same broad category as a wrench, a government, a personality test, and an atomic bomb. Specifically, an economy is a tool that helps a collective (a family, a city, a country, a world) distribute the resources available to it.

Like other tools, it’s good for some things and not for others. Like other tools, it can be handled properly or improperly. And like a lot of other tools, it’s possible to improve upon its design–either to make it more useful overall, or to make it better at some specific thing you need to use it for.1For example: a hammer with a shock-absorbing grip is an overall improvement, while a rubber mallet is a specific type of hammer that specializes in doing particular tasks well.

This definition is important because of language that’s often used around economic questions. For example, it’s often asserted that socialized medicine would lead to “rationing.” However, since medicine is part of the “economy,” it’s already “rationed”–it’s rationed by the market by setting higher price points for more complicated and rarer products, instead of being rationed by someone making a decision about who gets what. Setting a high price for something is a way of rationing that item to people who have the ability to pay for it.2One of the forces changing the economy today is that there are significant resources on the Internet that don’t need to be rationed, including information obtained through searches, social media posts, even video streams to a lesser extent. Since humanity isn’t capable of consuming all of the resources that one company is capable of producing, this results in a winner-take-all scenario that was extraordinarily rare before about 1998. Google receives nearly 80% of search traffic, but you can’t split up Google’s search engine as though it’s a monopoly because after an initial period of confusion, most of those users would settle on one of the two new engines, making it the “new Google.”

Any given economy has many ways to ration out its resources. In the United States, for example, we ration out emergency services based on people calling 911. In principle, we could let the market take care of emergency services, and you’d either have to sign up for a subscription (like an alarm company) or give them a credit card number before they put out the fire in your house, but at some point we decided to pay for emergency services with tax dollars instead, and ration out those services based on who was asking for them. But whether they’re handled by the market or by 911, centralized emergency services are part of how we distribute resources, and so they’re part of our economy.

Isn’t “capitalism” just a fancy word for “free market?”

“Capitalism” and “free market” are different things. Free market just means that anyone is able to sell a new product to compete with others that already exist in the marketplace. It’s the opposite of “monopoly,” whether that monopoly is owned by a single powerful business or a government entity. It’s a pillar of capitalism, but an economy doesn’t need to be capitalist to have free markets.

I’m not convinced there’s any such thing as a “free market economy.” Just like socialism (discussed below), there are different degrees to which an economy’s markets are free. Some items may be completely unregulated, while other items may be sold from only one vendor or handled outside the market.

Some products and services might be handled better by a free market, while other products and services are better handled by a regulated market or a closed market.3John Stuart Mill says in Principles of Political Economy, “Laissez-faire, in short, should be the general practice; every departure from it, unless required by some great good, is certain evil.” This represents the attitude of later “free-market” economists, including Milton Friedman (who, unlike Mill, held to this dogma his whole life). But careful readers will notice that even Mill allows for regulation when required by “some great good”–and as capital markets have become more complex, “good” and “evil” have also taken on complexity. Mill might have changed his mind about some things if he’d seen the financial instruments that brought about the housing crisis in 2008. You don’t have the ability to sign up for a private fire extinguishing service when you buy a home–that’s a market that isn’t free. Your house may be required to meet local building codes, but you can hire any licensed contractor to make sure it does–that’s a free but regulated market. You can also buy whatever decorations you want to put inside your home that are made by anyone, provided they don’t break other laws (e.g., they aren’t filled with cocaine or made with the fur of endangered animals)–that’s a free and unregulated market.

A market completely free of regulation only remains a free market for a short period of time. Markets left to themselves tend to eat themselves4Through mergers, acquisitions, or winner-take-all competitions. until only monoliths exist that are capable of either decimating or acquiring all their rivals.5Amazon is an example of a company that has been able to acquire or destroy most of its competitors before they came to be big enough to pose a challenge, however, it fails to meet the definition of a traditional monopoly because retailers like Wal-Mart still hold a non-trivial portion of the online market. Regulations are needed to prevent monopolies from forming and to ensure fair competition and consumer transparency (for example, without regulations McDonald’s would never have to tell anyone they’re putting sawdust in their food to make it cheaper).

The idea pushed by neoliberal (free-market) economists like Friedrich Hayek is that the free market is much more effective at distributing resources than any government could ever be. Some economists including Milton Friedman argue that allowing the market to distribute resources also maximizes efficiency and manages to create more resources where previously there were fewer.6A lot of economists believe “efficient market theory” was debunked in the 2008 market collapse. Market pricing itself was thrown off by the irrational behaviors of the actors within the market, proving that market prices could be inefficient for extended periods of time. But there are probably very few people who wouldn’t concede that at least some circumstances require us to offer resources based on need and not the ability to pay, and you won’t find many people who think we should do away with all money and assign resources only based on need either. Most economies will include some elements of free markets and some elements of central planning.

So what is “capitalism?”

Capitalism has a few basic features we’ll be looking at over the next several posts:

  1. Pricing: This is supposed to be the real advantage to capitalism. If a government entity tries to decide how much a new product might be worth, they might end up picking a number out of the blue that really doesn’t reflect everything that goes into making that product or what people could feasibly pay for it. But if a business tries to sell that product on the open market and another business tries to sell a similar product, the two competitors will keep adjusting their prices until they both hit a spot where they’re making acceptable profits or one of them has gone out of business.7This is what’s called a Nash Equilibrium. It doesn’t actually maximize benefit for anyone, it just describes the inevitable price points for competing products and vendors given what one’s competition will do. (There are a lot of problems with market pricing when rational decision-making is compromised and/or when long-term impact is taken into account. We’ll get into that later.)
  2. Value: Everything, no matter how abstract or intangible, can be assigned a monetary value. This includes the value of an idea, a policy, or a human life. It suggests that everything in existence, both real and imagined, can be valued in terms of the amount of money that would be paid for it. Items that have complex value (for example, human beings) are simplified to the relevant value–a human being might be valued based on her accounting skills when she’s being hired at an accounting firm, but would be valued based on her public speaking skills if she’s being hired as a diplomat, or valued based on the cost of a wrongful death settlement when a car company is thinking about recalling its airbags, or valued by the total of all the potential money she would have made over the rest of her life if an economist is trying to determine the economic impact of her early death. It’s a simultaneously practical and horrifying way of thinking about the world.
  3. Means of production: In a capitalist economy, the government doesn’t own assets such as farms, factories, workshops, recording studios, and oil refineries–the means of producing the products we buy. The “means of production,” as they are called, are owned by private citizens, either individually or as corporations, trusts, funds, cooperatives, and similar structures.8The line between “government” and “corporation” is much murkier than politicians make it out to be. It’s not inappropriate to think of the market as a de facto fourth branch of American government. Whoever holds the means of production is able to set rules and determine important aspects of the lives of citizens. In this light, it may deserve the same respect as, say, the judiciary, but it should also be treated as limited.

    The means of production are the source of all wealth. Labor isn’t important to capitalism–it represents a necessary expense in order to extract the value from assets, and should be minimized as much as possible. Capital–or the means of production–is what’s important. Labor is paid with wages that get spent on products. Capital yields profits that are invested into more capital. Labor is always depleting resources while capital is always accumulating them.

    The basic idea put forward by Adam Smith back in the 1700’s is that someone controls the capital–a needle factory, for example–and hires other people to work for him. These employees are able to produce a lot more than they would if they were working alone because they’re able to specialize into the tasks they’re most competent at performing–for example, pulling the wire, cutting the wire, shaping the head, sharpening the tip. Where one person could make, say, 200 needles per day doing every task on her own, four people could make 2,000. In Adam Smith’s ideal world, the workers get more money than they would on their own because they’ve produced more needles, and the factory owner would harvest the excess value–for example, if each employee gets 300 needles worth of wages, the factory owner would still get 800 needles worth of profits.9Adam Smith was idealistic in his illustration. The more likely economic reality of this scenario is that the employees get the lowest wages that the factory owner can offer them, because the factory owner is able to price his needles lower than the needles produced by individual craftspeople. That is, the four people who were selling their own needles at 50 cents apiece now have to compete with a factory selling needles for 40 cents apiece, so they will have to lower their prices to 40 cents and get only $80 a day, or work for the factory for $85 a day, where previously they were able to sell their own needles for $100 a day. The irony is that the factory owner’s profits are lower than they would be if he continued to sell needles for 50 cents and paid the employees $110 a day, but because the free market is competitive, this would leave a lot of room for a competitor to come in and sell needles at lower prices. In any of these scenarios, however, the factory owner comes out better than all of the workers, which is the point.
  4. Capital Accumulation: Not only does capital produce profits, it also accumulates wealth. Most of the things money can buy in the world, from cars to computers to carrots, are depreciating assets. They decay over time or are used up, resulting in a destruction of wealth. But there are some assets, such as land, factories, and brand names, that can become more valuable over time. People who own these things get wealthier without having to work (appreciation),10It wouldn’t be accurate to say that they don’t do any work, but it is accurate to say that the work they do isn’t what makes them wealthy. The capital is what makes them wealthy. Many wealthy people hire an investment advisor to do the work for them and can continue to accumulate wealth while doing no work at all. while people who work and buy things will have to work and buy more things because their things keep getting used up (depreciation). Most people have a little bit of both appreciation and depreciation: you might have a retirement account that holds stocks that appreciate over time, but your clothes depreciate as they wear out and you have to buy new ones. The greater the proportion of appreciating assets you have, the more your wealth accumulates. When defining the valuation of a human being, there are two tiers: People who are valued based on the work they can do, and people who are valued based on the capital they control. A truck driver for McLane Company is valued based on her labor; Warren Buffett, the CEO of McLane’s controlling company Berkshire Hathaway, is valued based on his assets.
  5. Capital Markets: Once separate pieces of capital are pulled together into a mode of ownership, such as a corporation, you can break up that ownership into pieces and sell them to other people. And because everything can be assigned a value, and because selling it on a market in a competitive environment results in an actual price, you can do this with anything. (That’s what got the United States economy into trouble in 2008: lenders taking a bunch of mortgages, packaging them together and selling them, then taking pieces of those packages, packaging them together, and selling them, then hedging some of those against other packages… etc.)
  6. Fluidity: The free market isn’t just for products and capital. Unlike feudalism, people can easily move between different employers under capitalism, even without having to pick up and move to another part of the world. The flip side of this is the degradation of community: since people need to be able to move around easily, your bonds with your neighbors are weaker. Everyone is responsible for her own fate, and many more of our interactions are transactional: instead of confiding in your local priest or preacher, or talking things through with your neighbors, you might pay a therapist or life coach to listen to your problems.11This is what sociologist Ferdinand Tönnies called “Gesellschaft,” which represents a broad and anonymous society, in opposition to “Gemeinschaft,” which represents a specific and familiar community.

As I’ve described in a previous post, capitalism effectively decoupled and abstracted political and economic realities as they existed under feudalism. Where feudalism required wealthy people to own land, capitalism enabled wealthy people to maintain and grow their wealth independent of land.12This was an important transition with the ending of the Malthusian era–where the total wealth available to a population essentially came down to the ability to produce food. Once we invented better ways to produce food, wealth became disassociated from land. This also means violence takes on a different form under capitalism, and warfare and destruction is less direct.

Why capitalism?

Capitalism is underpinned by a belief in the effectiveness of rational (or enlightened) self-interest: that people make the best decisions for their own needs with the information they have available to them.13That people consistently act against their own rational self-interest does not dissuade believers in capitalism. Usually there is a rationalizing belief that irrational actors get edged out of the market, that poor people are either lazy or need to educate themselves, that the “self-interest” part can be irrational but a person will still act rationally to get it, etc. The result is the “invisible hand” of the marketplace moving to fulfill the needs people are ready to pay for: if all of a sudden everybody wants to eat radishes, the price for radishes will go up and more people will grow radishes because they’ll get a better price for them. (In later posts we’ll look at how this breaks down, especially in the age of the Internet.)

Capitalism was originally developed in opposition to the idea of a central regime–usually a monarchy–attempting to make the best determinations about how resources should be used. Under feudalism, a monarchy might grant a certain portion of land to a knight, who would be the caretaker of that land and all the commerce that was conducted on it. As opposed to the visible hand of a ruler distributing resources under a feudal economy, capitalism depended on an “invisible hand” distributing resources based on how much people would pay for a product or service.

It’s helpful to see capitalism as the product of its particular time:14To put capitalism into perspective next to similar ideas in physics, capitalism is like Newtonian physics. We still use Newtonian physics for some purposes, but imagine if technologies refused to take relativity or quantum mechanics into account–we wouldn’t have inventions like GPS or even modern computers.) the Age of Enlightenment, when philosophers and lawmakers alike saw education and rationality as a way of elevating humanity15Enlightenment rationality has a long and problematic history with the concept of race, in which white Europeans were thought to carry the “white man’s burden” of rationality into the rest of the world and elevate all other races of humanity beyond what they would be capable of achieving without the salvation of white rationalism and scientific progress. This belief has influenced modern politics among both conservatives and liberals, long after it became unfashionable to be explicitly and unapologetically racist. out of conflict, poverty, and all our other problems. If most men16Enlightenment rationality also has a long and problematic history with sexism, in which for a long time only men were believed to be capable of rationality, and even today women are frequently dismissed as emotional or irrational. On the other hand, feminists such as Mary Wollstonecraft made appeals to rationality as a way of bolstering their arguments. Even so, it’s been argued that rationalism was the language of the time and not a prerequisite for the success of feminism. became educated and rational, the thinking was, they would be able to lead less rational men and women toward a collective social ideal.

Capitalism was successful in its time due to the invention of new technologies and methods of organizing. Today, the invention of new technologies and methods of organizing are among the reasons we need to develop new economic models and methods that leave capitalism behind.

What about socialism?

There’s a lot of discussion about socialism in the political arena these days. To some people it’s a scary word. Others embrace it whole-heartedly. But what is it?

Socialism is a version of capitalism where the government owns a stake in some industries. Depending on how you define “industry,” most economies are socialist to greater or lesser degrees. For example, in the United States, the government owns most of the military industry and the education industry, as well as a significant stake in the amusement and tourism industry in the form of parks, museums, and monuments, and a pretty big piece of the transportation industry in terms of roads, bridges, waterways, and airports. This isn’t the degree to which the United Kingdom is socialist, where the government owns some television and radio broadcasting channels and the lion’s share of the medical industry, but the United States government owns a pretty large portion of certain industries and so can be called a socialist government already. So the discussion isn’t about whether to be socialist, but about which industries benefit from government involvement and to what degree.

To be clear, I intend to look at issues with capitalism itself, which means the solution may not be socialist in nature. It might require a re-thinking of the assumptions of capitalism, which would necessarily challenge socialism as well.

What about communism?

In my view, communism is also a modification of capitalism. The means of production are held in common by the people, but otherwise it’s intended to work more or less the same way.

In its purest form, communism requires the means of production to be owned by a democratic government and made available to the people based on who will make the best use of it. For example, if one person wants a piece of land to build a farm and another person wants to build a factory on it, there would be a rational, unbiased way of determining whether the factory is needed, whether it’s a good location for a factory, whether the soil and rain conditions are good for farming, etc., in order to decide which person should use that piece of land. In practice, centralized decision-making is the sort of outrageous idea that could only be conceived in an early Industrial Age mindset, when it seemed like rationality would take over the world and everything would become quantifiable.

In the capitalist ideal, some profits flow to workers by way of increased wages, while the rest flow to the owners by way of capital accumulation (whether or not that actually works is another question). In the communist model, the state takes the place of the owner. It’s a shortcut to the dark capitalist utopia envisioned by Arthur Jensen in the movie Network: “one vast and ecumenical holding company, for whom all men will work to serve a common profit, in which all men will hold a share of stock, all necessities provided, all anxieties tranquilized, all boredom amused.”

The real flaw in communism is not that it kills worker motivation but that having a centralized decision-making process about who gets to use assets is extremely prone to corruption and the short-sightedness of the central decision-makers.((Even if it is, in principle, controlled by all the people. In principle, the United States government executes the will of the people, and yet somehow only 17% of people as of the latest Gallup poll approve of Congress. That number hasn’t been above 50 percent since 2003. It’s hard to imagine people would be happier with Congress if it were directly in charge of all the jobs, resources, and products in the country. Put the no-nonsense Jack Welch in charge and you might stifle innovation for a decade, put the visionary Steve Jobs in charge and you will get a tremendous amount of innovation that fits his particular vision but nothing outside of that. Even the perfect candidate would be limited by human decision-making, and let’s be honest when assessing our human tendencies toward rationalizing corruption.

What’s wrong with capitalism?

It’s been my conviction for the past several years that we are seeing a shift that heralds the end of capitalism as a ruling ideology in our world. This isn’t because we’re getting smarter–it’s because capitalism, and its variations including socialism and communism, fail to address our economic realities.

Some people think this is a bold claim, some people think it’s ridiculous, some people might even think it’s anti-American. But to me it’s about as obvious as pointing out that winter is coming: it’s getting colder, the leaves are falling, we all know where that leads. And if capitalism is ending, we’d better get ready to replace it with something.

I don’t have the solution for what replaces capitalism. But this is a conversation I’m ready to have with other humans who want to see a world in which ordinary people can produce meaning and improve our collective quality of life.

What follows will be a series of posts pointing out what I see as some of the key strengths and weaknesses of capitalism, so that we can begin to talk about how we might do better in the future.

If I left anything important out of my definition of capitalism here, please feel free to comment below. Keep the comments on this post to a discussion of the definition here–there are going to be a lot of posts in this series and there will be plenty of time for criticism and theorizing. It will be helpful to have a solid working definition to start.

Talk to you soon, fellow humans.

References   [ + ]

1. For example: a hammer with a shock-absorbing grip is an overall improvement, while a rubber mallet is a specific type of hammer that specializes in doing particular tasks well.
2. One of the forces changing the economy today is that there are significant resources on the Internet that don’t need to be rationed, including information obtained through searches, social media posts, even video streams to a lesser extent. Since humanity isn’t capable of consuming all of the resources that one company is capable of producing, this results in a winner-take-all scenario that was extraordinarily rare before about 1998. Google receives nearly 80% of search traffic, but you can’t split up Google’s search engine as though it’s a monopoly because after an initial period of confusion, most of those users would settle on one of the two new engines, making it the “new Google.”
3. John Stuart Mill says in Principles of Political Economy, “Laissez-faire, in short, should be the general practice; every departure from it, unless required by some great good, is certain evil.” This represents the attitude of later “free-market” economists, including Milton Friedman (who, unlike Mill, held to this dogma his whole life). But careful readers will notice that even Mill allows for regulation when required by “some great good”–and as capital markets have become more complex, “good” and “evil” have also taken on complexity. Mill might have changed his mind about some things if he’d seen the financial instruments that brought about the housing crisis in 2008.
4. Through mergers, acquisitions, or winner-take-all competitions.
5. Amazon is an example of a company that has been able to acquire or destroy most of its competitors before they came to be big enough to pose a challenge, however, it fails to meet the definition of a traditional monopoly because retailers like Wal-Mart still hold a non-trivial portion of the online market.
6. A lot of economists believe “efficient market theory” was debunked in the 2008 market collapse. Market pricing itself was thrown off by the irrational behaviors of the actors within the market, proving that market prices could be inefficient for extended periods of time.
7. This is what’s called a Nash Equilibrium. It doesn’t actually maximize benefit for anyone, it just describes the inevitable price points for competing products and vendors given what one’s competition will do.
8. The line between “government” and “corporation” is much murkier than politicians make it out to be. It’s not inappropriate to think of the market as a de facto fourth branch of American government. Whoever holds the means of production is able to set rules and determine important aspects of the lives of citizens. In this light, it may deserve the same respect as, say, the judiciary, but it should also be treated as limited.
9. Adam Smith was idealistic in his illustration. The more likely economic reality of this scenario is that the employees get the lowest wages that the factory owner can offer them, because the factory owner is able to price his needles lower than the needles produced by individual craftspeople. That is, the four people who were selling their own needles at 50 cents apiece now have to compete with a factory selling needles for 40 cents apiece, so they will have to lower their prices to 40 cents and get only $80 a day, or work for the factory for $85 a day, where previously they were able to sell their own needles for $100 a day. The irony is that the factory owner’s profits are lower than they would be if he continued to sell needles for 50 cents and paid the employees $110 a day, but because the free market is competitive, this would leave a lot of room for a competitor to come in and sell needles at lower prices. In any of these scenarios, however, the factory owner comes out better than all of the workers, which is the point.
10. It wouldn’t be accurate to say that they don’t do any work, but it is accurate to say that the work they do isn’t what makes them wealthy. The capital is what makes them wealthy. Many wealthy people hire an investment advisor to do the work for them and can continue to accumulate wealth while doing no work at all.
11. This is what sociologist Ferdinand Tönnies called “Gesellschaft,” which represents a broad and anonymous society, in opposition to “Gemeinschaft,” which represents a specific and familiar community.
12. This was an important transition with the ending of the Malthusian era–where the total wealth available to a population essentially came down to the ability to produce food. Once we invented better ways to produce food, wealth became disassociated from land.
13. That people consistently act against their own rational self-interest does not dissuade believers in capitalism. Usually there is a rationalizing belief that irrational actors get edged out of the market, that poor people are either lazy or need to educate themselves, that the “self-interest” part can be irrational but a person will still act rationally to get it, etc.
14. To put capitalism into perspective next to similar ideas in physics, capitalism is like Newtonian physics. We still use Newtonian physics for some purposes, but imagine if technologies refused to take relativity or quantum mechanics into account–we wouldn’t have inventions like GPS or even modern computers.) the Age of Enlightenment, when philosophers and lawmakers alike saw education and rationality as a way of elevating humanity((Enlightenment rationality has a long and problematic history with the concept of race, in which white Europeans were thought to carry the “white man’s burden” of rationality into the rest of the world and elevate all other races of humanity beyond what they would be capable of achieving without the salvation of white rationalism and scientific progress. This belief has influenced modern politics among both conservatives and liberals, long after it became unfashionable to be explicitly and unapologetically racist.
15. Enlightenment rationality has a long and problematic history with the concept of race, in which white Europeans were thought to carry the “white man’s burden” of rationality into the rest of the world and elevate all other races of humanity beyond what they would be capable of achieving without the salvation of white rationalism and scientific progress. This belief has influenced modern politics among both conservatives and liberals, long after it became unfashionable to be explicitly and unapologetically racist. out of conflict, poverty, and all our other problems. If most men((Enlightenment rationality also has a long and problematic history with sexism, in which for a long time only men were believed to be capable of rationality, and even today women are frequently dismissed as emotional or irrational. On the other hand, feminists such as Mary Wollstonecraft made appeals to rationality as a way of bolstering their arguments. Even so, it’s been argued that rationalism was the language of the time and not a prerequisite for the success of feminism.
16. Enlightenment rationality also has a long and problematic history with sexism, in which for a long time only men were believed to be capable of rationality, and even today women are frequently dismissed as emotional or irrational. On the other hand, feminists such as Mary Wollstonecraft made appeals to rationality as a way of bolstering their arguments. Even so, it’s been argued that rationalism was the language of the time and not a prerequisite for the success of feminism. became educated and rational, the thinking was, they would be able to lead less rational men and women toward a collective social ideal.

Capitalism was successful in its time due to the invention of new technologies and methods of organizing. Today, the invention of new technologies and methods of organizing are among the reasons we need to develop new economic models and methods that leave capitalism behind.

What about socialism?

There’s a lot of discussion about socialism in the political arena these days. To some people it’s a scary word. Others embrace it whole-heartedly. But what is it?

Socialism is a version of capitalism where the government owns a stake in some industries. Depending on how you define “industry,” most economies are socialist to greater or lesser degrees. For example, in the United States, the government owns most of the military industry and the education industry, as well as a significant stake in the amusement and tourism industry in the form of parks, museums, and monuments, and a pretty big piece of the transportation industry in terms of roads, bridges, waterways, and airports. This isn’t the degree to which the United Kingdom is socialist, where the government owns some television and radio broadcasting channels and the lion’s share of the medical industry, but the United States government owns a pretty large portion of certain industries and so can be called a socialist government already. So the discussion isn’t about whether to be socialist, but about which industries benefit from government involvement and to what degree.

To be clear, I intend to look at issues with capitalism itself, which means the solution may not be socialist in nature. It might require a re-thinking of the assumptions of capitalism, which would necessarily challenge socialism as well.

What about communism?

In my view, communism is also a modification of capitalism. The means of production are held in common by the people, but otherwise it’s intended to work more or less the same way.

In its purest form, communism requires the means of production to be owned by a democratic government and made available to the people based on who will make the best use of it. For example, if one person wants a piece of land to build a farm and another person wants to build a factory on it, there would be a rational, unbiased way of determining whether the factory is needed, whether it’s a good location for a factory, whether the soil and rain conditions are good for farming, etc., in order to decide which person should use that piece of land. In practice, centralized decision-making is the sort of outrageous idea that could only be conceived in an early Industrial Age mindset, when it seemed like rationality would take over the world and everything would become quantifiable.

In the capitalist ideal, some profits flow to workers by way of increased wages, while the rest flow to the owners by way of capital accumulation (whether or not that actually works is another question). In the communist model, the state takes the place of the owner. It’s a shortcut to the dark capitalist utopia envisioned by Arthur Jensen in the movie Network: “one vast and ecumenical holding company, for whom all men will work to serve a common profit, in which all men will hold a share of stock, all necessities provided, all anxieties tranquilized, all boredom amused.”

The real flaw in communism is not that it kills worker motivation but that having a centralized decision-making process about who gets to use assets is extremely prone to corruption and the short-sightedness of the central decision-makers.((Even if it is, in principle, controlled by all the people. In principle, the United States government executes the will of the people, and yet somehow only 17% of people as of the latest Gallup poll approve of Congress. That number hasn’t been above 50 percent since 2003. It’s hard to imagine people would be happier with Congress if it were directly in charge of all the jobs, resources, and products in the country.

My next journey

I’m revisiting my blog today because I’m about to embark on a new journey, and I have some things to work out before I do. I’m a synthesizer of information who is constantly processing inputs, and occasionally I need a little space to lay things out in front of me. The ideas can change but they’re unlikely to be placed back neatly into the socially accepted boxes.

This fall I will begin a year-long Master of Arts in Social Science (MAPSS) program at the University of Chicago.

I’ve always been more a problem solver than a true scientist. I’m detail-oriented enough to see when the small picture contradicts the big one, but it’s always been difficult to focus on a very specific, quantifiable problem and eliminate all the variables and spend months or years answering that narrow question. My tendency is to spend maybe a few days figuring out a piece of the puzzle, or leaving a specific question alone and coming back to it over time until I can figure out how it fits the facts, until I’ve got something that looks like a full picture. So it will be interesting to put myself in an environment with not just the literature of the social sciences, but the scrutiny of the scientific method.

My overall goal is the same as it’s been: a more human future, one that expects us to be who we are and brings out the best in us. It’s idealistic, something that will be radical probably forever because it struggles against power. But any goal that is less idealistic simply accepts suffering and destruction as a by-product with certain levels of tolerance. There’s something useful in setting a standard that shows where we can continue to reduce suffering and destruction.

I hope by the end of this program to have a framework for mediating a conversation about our more human future–maybe what comes after this present society collapses, or maybe something we can achieve without a great collapse. Whatever it is, it will need to free us from the toxic influence of power structures such as racism and sexism, reunite us with our neighbors, and bind us together in ways that allow us to operate with intent instead of by isolated, impulsive decisions.

The ideas may sound good in theory, but in practice they run up against everything in American culture that has power. So it will partly be up to us to convince the powerful that power itself is corrosive, toxic, and ultimately deadly.

We live in a time where the conversation is turning. The public consciousness is catching up to our changing reality, starting to give it a language so that we can speak about what is changing and who we want to be. The Movement for Black Lives, #MeToo, and similar efforts are amplifying voices and holding the mirror up to our current power structures, asking us to throw off our chains–chains so old that no one can honestly remember where they came from or what they are for, and so new reasons are made up and new rules are tacked on and we never manage to free ourselves from them. It’s long past time to correct the sins of our fathers, take off these chains and meet one another as fellow human beings once again.

With these thoughts in mind, I’m going to begin laying out many of the things I’ve been mulling over for so long, beginning with a topic that has become the punching bag of modern political discourse: capitalism.

Talk to you soon, fellow humans.

How Emergence Works in Organizations

Emergence isn’t about collecting a bunch of fine people and letting them do what they want with no structure of any kind. In fact, emergence needs structure–just not the same kind of structure traditional organizations use.

Functionally speaking, the traditional top-down structure is a method of augmenting one person’s ideas with the minds and bodies of others–like a human Voltron.

Voltron with an overlay of an org chart

This is familiar to our way of thinking–a reflection of Industrial Age ideals of order, rationality, and efficiency. But Voltron is ultimately a machine, and as we enter the Second Machine Age, organizational structures that mimic machines are going to fall by the wayside: they are less efficient than actual machines, and less adaptive (in an evolutionary sense) than organic communities.

Consider the example of Microsoft’s .NET versus the open-source Ruby On Rails: the closed, controlled, heavily planned product has consistently lost market share for years, while the decentralized, agile developer community has turned out a consistently more popular and more useful product. In terms of external incentives and long-term planning, Microsoft should have the better product. Instead, Microsoft is planning to make .NET open-source because of the spectacular failure to keep up. The organic community has unequivocally trumped the traditional model.

Let’s take another stab at that organization chart. Take the person at the top and place her instead in the middle. Connect her to all her sources of information, her co-workers, the people who report to her, the people to whom she reports. Do the same for each of those people to whom she’s connected, outward until everyone in the organization is accounted for, and connect each of them with their points of contact to the outside world. What you have now much more resembles a neural network:

Map of the neural network of a mouse

This isn’t an aspirational image, it’s a reflection of reality–a reality that the former image attempts to control and confine into a linear hierarchy. For comparison, here is a map of Twitter employees using the platform:

Network map of Twitter employees

Seeing an organization in this way–as it organizes itself, and not as the linear design into which we try to squeeze it–reminds us of the first principle of emergent structure: the number and quality of connections improves emergent behavior.

This isn’t a call to increase the number of networking events at your business. Human beings will create connections on their own if given the right environment.

Consider Google’s practice of mixing functional groups on the floor. While this would be anathema to a linear hierarchy–I would have to walk to another part of the building to talk to a co-worker–at Google, the people around you may become your co-workers. Some businesses have replicated the design without taking into account the hierarchy and culture, resulting in marginal improvements at best, and often employee frustration. (Even at Google the practice is not without its drawbacks, but it is an intentional culture play.)

The quality of the connections is likewise based on trust; the traditional organizational structure makes trust unnecessary, and by making it unnecessary, undermines it. This leads to a second principle of emergent structure: where traditional organizations depend on chain of command, emergent structure depends on social contracts.

A social contract is, at its most basic, an agreement held in common between any number of people, either written or implied. Top-down structures choose policies and impose them. Leaders of adaptive organizations make a case that a policy is in the best interest of the organization, and modify it based on the needs and applicability to a particular population. We all agree that we need to follow a certain regulation or we will face prosecution, therefore we promise to follow that regulation and hold one another to it.

In this way, instead of imposing a rule that employees follow like the speed limit (seven miles per hour over isn’t really speeding, you know), employees are accountable to one another for their actions. We all know we have made the promise with one another; when I violate the promise, I have broken my promise with everyone in the organization.

Social contract underpins the entire structure of a culture. When I expect that I have ownership over my work and it won’t be taken away from me and given to someone else, that is an implied social contract. When I expect that I can do my work every day without fear of sexual harassment, that is (usually) a written social contract.

Social contract also defines the leadership of an organization. A person can be an owner if he has enough money, and he can be a manager if he has enough connections, but he can only be a leader if he has people willing to follow him.

Finally, in addition to good connections and social contracts, emergent structure requires process. This may seem to contradict what I’ve said so far, except that human processes are approximate–they are always applied using judgment and a “feel” for the particular situation.

Human process is an interesting phenomenon. Machine processes can be made to take variables into account, but machines don’t make judgments. And machines don’t vary processes in ways they haven’t been explicitly programmed to learn, i.e., they don’t introduce personal experience or personal interpretation. Emergent behavior in an organization depends upon human experience and variability, working against an established process, to produce unexpected outcomes. Only processes that are documented and followed can be improved. Everything else is folk knowledge, which is improved by rare individuals and passed piecemeal to others.

This kind of adherence to and improvement of process depends wholly upon social contracts and quality connections: I must know that I am not documenting my changes to the process on behalf of some uncaring management four levels above me, I’m keeping rigid documentation on behalf of people like myself in the organization who are doing their best to cover for one another and keep things moving.

This is why I encourage you to abolish the idea that there is a “top” or “bottom” to your organization. The goal is to have a structure where everyone finds the most appropriate place for as long as that place is appropriate, not a structure where everyone struggles to climb as high as they can. In order for this to work, we also need to rethink the role of leadership in such an organization–because it is still critically important–and what that leadership is attempting to do.

I’m eager to get your thoughts on all this. Did any of this sound like an organization where you’ve worked, either under the traditional model or under a more adaptive approach? Have you seen leaders embrace the “neural network” of organization and truly try to engage all their members in uniquely meaningful ways?

The Strengths of Adaptive Organizations

While most of my posts can be applied to many different kinds of organizations, and even more can be applied to businesses specifically, I write all my posts with adaptive organizations in mind.

Adaptive organizations are generally loosely-structured, non-hierarchical, and depend on temporary teams to pop up and disband on their own. They’re the primary focus of Frederic Laloux’s book Reinventing Organizations, as well as the driving philosophy behind the consulting firm Undercurrent.

Adaptive organizations are designed to maximize the co-operation of human and machine. Unlike Industrial Age organizations, adaptive organizations (what Frederic Laloux calls “teal” organizations) do not rely on humans functioning as machines. Instead, they depend on the value created by healthy individuals, collected from diverse backgrounds and bonded into communities by a common vision for the future.

The contrast between the two concepts can be so pronounced that some can’t even fathom how these futuristic organizations would work. But the fact that adaptive organizations are already beginning to emerge (as with Spotify, Valve, and GitHub) shows that they aren’t just a philosophical exercise. They are real, they are successful, and they will continue to thrive.

Laloux outlines three principles of adaptive organizations: self-management, wholeness, and evolutionary purpose. While these are incredibly useful guidelines for creating a future organization, they don’t quite explain why adaptive organizations work. I’d like to propose three corollaries to Laloux’s principles.

  1. Traditional organizations rely on planned behavior; adaptive organizations encourage emergent behavior. Traditional organizations are heavily planned: they hire people with specific skill sets to fit into specific roles and accomplish specific tasks that make up a system that’s carefully designed to play out the vision of the entity at the top. This ultimately makes traditional organizations less than the sum of their parts. Adaptive organizations operate at the opposite end of the spectrum: they expect employees to manage themselves and one another dynamically. Fixed hierarchy is counter-productive because it limits deviation from an established agenda; in a fixed hierarchy, I don’t have much room to do anything that doesn’t directly benefit my immediate supervisor, and he in turn has little room to do anything that doesn’t benefit his immediate supervisor. Designing an organization to encourage emergent behavior means opening up to unplanned innovation by anyone at any time. It can be equal parts dangerous and game-changing; the art and science of emergent behavior is to minimize the danger without discouraging the game changers.
  2. Traditional organizations consolidate efforts in an attempt to design the best, most efficient single outcome; future organizations rely on multiple discovery to generate iterative, multi-dimensional innovation. When a traditional organization discovers two different efforts to accomplish a similar goal, it’s seen as inefficient. Duplicative efforts are shut down and/or consolidated into one another, leading to political battles and possibly resentment on the part of the employees who were trumped. These consolidation efforts frequently fail, either in process (they are never completed) or in product (the outcome is too unwieldy or unhelpful). Multiple discovery allows several efforts to reach the same point from multiple directions, or to reach different points from a similar origin. The outcomes of the individual efforts tend to be leaner and more focused, and if one option fails there are others at the ready.
  3. Traditional organizations depend on metric productivity (output divided by hours divided by pay rate); adaptive organizations develop unique value. Metric productivity is the enemy of unique value: it suggests that all products, customers, and employees are comparable and judges each employee against some Platonic ideal of productivity. Metric productivity is what causes us to believe that putting in more hours makes us more valuable to our employer, that what we do to our bodies in our off-hours isn’t important to what happens when we’re on the clock, that our mental and spiritual and social well-being is something we do on our own time and work doesn’t factor into it. But metric productivity isn’t just bad for employees, it’s also a dead end for employers. If your concern is wholly for metric productivity, chances are high that you’re in competition with someone. Competition is a sinkhole. If you’re not digging yourself out of it and creating unique value, you’re bound to lose.

This is how adaptive organizations can thrive in spite of the concerns that keep leaders locked into traditional models. Adaptive organizations eschew the assumptions of traditional organizations–efficiency, competitive pricing, planned behaviors and outcomes–and take the lead because they engage both employees and customers in a way that makes traditional competition obsolete. They also gain efficiencies in unexpected ways–from Buurtzorg spending less time on patients by spending more time with them, to Netflix’s “the best are 10x better than average” philosophy. In the end, adaptive organizations are even better than traditional organizations at traditional metrics, because they focus on purpose and put the future of their organization in the hands of each individual. Instead of focusing on functional planning, an effective leader provides focus, narrative, and inspiration to the efforts of the collective–as Saint-Exupery puts it, she teaches them “to yearn for the vast and endless sea.”

This post serves as the frame for my next several posts, in which I’ll tackle multiple discovery and dig further into emergent behavior to provide some practical understanding of how to apply these concepts to a real organization.

What do you believe about adaptive organizations? What’s keeping you from applying these principles to your own organization? I look forward to discussing with you in the comments.

Who Is the Mother of Invention?

You’ve heard that “necessity is the mother of invention.” It’s a proverb that’s likely over 500 years old. But what does it mean?

The saying might recall Captain Kirk calling down to Scotty in engineering, and Scotty iconically replying, “She canna take much more, Cap’n!” Fans of the show 24 similarly joke about Jack Bauer telling Chloe to “just do it!” as the push she needs to make the impossible happen. And let’s not forget the ingenious agent Macgyver. Our culture is rife with the myth of the skilled but uncertain innovator solving an impossible problem in an unrealistic time frame simply because it was necessary. This kind of resourcefulness is a cornerstone of Americans’ beliefs about economics and the world.

But the question is: How true is it? Not the one-in-a-million stories we pluck from the biographies of rags-to-riches businessmen, but the kind of everyday invention and innovation that drives our economy forward. Does desperation drive invention? Or is it something else?

The answer, as with many things, is dependent on the specific definition and context. Desperation as a sense of urgency to meet a particular deadline may spur certain kinds of innovation. But desperation as a state of being–that is, the lack of security around one’s position, as with financial poverty or the ongoing threat of being fired–tends to lock us into survival mode. Desperate people grasp at proven solutions that promise to get them what they need, rather than inventing solutions that may not be sufficient.

That’s not to say these solutions are without risk. But consider someone who agrees to transport bulk drugs: The activity is risky, but the payoff is assured. Innovation requires room to be uncertain about the outcome: Will there even be a payoff? Will it be big enough? You can see this play out at companies that are in danger of bankruptcy: Rather than innovating out of the problem, for the most part they cut down to the basics and try to replicate past success. For every individual that becomes more innovative under that kind of pressure, thousands lose the ability to innovate at all.

If not desperation, then, what drives innovation?

The first parent may surprise you: Laziness. We innovate because the way things are being done is just too much work. This is part of the reason for a disconnect between hours worked and productivity: An innovator can work half as much as someone who doesn’t innovate, and still accomplish more. Laziness gets a bad rap simply because there are so many who misuse it. One of my own innovations early in my working life was a matter of saving myself the tedium of several weeks of repetitive tasks. That innovation was ultimately spread to offices around the country and saved hundreds of hours.

The other is often thought to be exactly the opposite: Enthusiasm. We also innovate because we want something new and better for the future. Our ability to anticipate the future is one of the things that distinguishes human evolution from natural evolution: we can evolve not just for the present circumstances but for the circumstances we anticipate.

Together, laziness and enthusiasm are the push and the pull of an engine. Laziness, better described, is a dissatisfaction with or disinterest in things as they are; enthusiasm is a deep interest in the possibility of things to come. Spitting out what is and sucking in what’s coming is the process that drives innovation forward. Without enthusiasm, laziness becomes pessimistic and defeatist. Without laziness, enthusiasm becomes toothless; if the present isn’t so bad, it’s better to just let that future come on its own.

Necessity may be a parent of invention in at least one sense: We invent things that are useful to us. If we didn’t need it, why would we invent it? This reveals a critical problem with the way innovation is handled in many organizations. Some businesses try to institute an “innovation department.” But isolating the innovators from the problems is self-defeating. An innovation department has to go the extra mile just to understand what problems need to be solved, and may often end up solving problems that don’t exist or aren’t high-priority. The power for innovation is always best placed in the hands of those who experience the need on a daily basis.

Better Business Through Storytelling

When you tell a story, you’re not always writing it in a narrative format. With a business plan, financial statement, or presentation, you’re often presenting facts that don’t look like a narrative.

But people understand facts by placing them in the context of a narrative. So even if you’re not deliberately structuring a narrative, your audience is always constructing a narrative around the facts that you present.

This leaves you with a problem: Are they constructing the narrative you want?

It’s easy to confuse the facts with our interpretation of the facts, or to assume our story is the only one that can be derived from the facts. It can be helpful to present the facts without trying to load a story into them, if you are presenting to a safe audience that can give you a different perspective on the story.

But when you assume that the story you’re telling yourself is the one your audience will see, you may:

  • leave out key facts
  • fail to contextualize the facts
  • fail to adequately explain causes and effects
  • over-emphasize less-important points
  • fail to present a coherent picture

Another part of the problem is control, or presenting the facts in such a way that they tell the story you intend. If you’ve ever been confused by what was supposed to be a straight-forward movie, then you’ve experienced a storyteller who lacked control. It’s a skill that can take years to master.

But you can improve your skills with everyday storytelling, and as a result improve your impact both in your organization and in your everyday life. Here are some questions I tend to ask, intuitively as a storyteller, when I’m presenting to an audience.

  1. Do these facts present a beginning, middle, and end? For example, do they represent what we expected, the facts and methodology that changed our expectations, and the new direction we find ourselves taking?
  2. How do these facts draw us out of the ordinary day-to-day of life, i.e., the assumptions and routines that form the way we operate in our eight hours a day?
  3. Who is the hero of this story? In other words, whose action is most important to the outcome? Am I asking someone to help me, or am I trying to help someone else? (Whoever is being helped to achieve something is usually the hero–but be careful, you may be asking someone to help you help them.)
  4. If I am the hero of this story, what role is my audience playing? What intrinsic motivations and extrinsic rewards can I reference to encourage their involvement?
  5. If my audience is the hero of this story, why am I involved? What do I have to contribute to the hero’s quest, and why do I care so much about it?
  6. If a third party is the hero of this story, why is the story so important? What is our motivation to collaborate and elevate the third party? And why isn’t that third party involved in the telling you’re doing now?
  7. What are the obstacles ahead? What enemies must be defeated, what challenges must be overcome, what dangers have to be endured? How can we prepare the hero to surpass these obstacles?
  8. What is the future if the hero manages to overcome the obstacles? Is it worth the risk and the investment, not just for the hero, but for everyone in the story? (Remember not to appeal to extrinsic rewards except where intrinsic motivations aren’t enough to spur action.)
  9. Why? A story illuminates the reasons (or lack of reason) behind everything. So for every fact and every statement, ask the question, “Why?”

The more you practice looking for the story and contextualizing your facts, the more intuitive these ideas will become, and the better you will become at controlling the story others are seeing.

Once again, it’s not always a good idea to control the story. With a safe audience, it can be better to present straight facts to check whether the story they see is the same as the story you have in your head. We don’t always have the best or most accurate story. However, it’s also dangerous to present facts to an unsafe audience without knowing what story you’re telling and whether you’re telling it well.

Rethinking Your Government

Corporate governments don’t often look to the past to see the evolution in tribal and national governments, and consider whether the next step in management will follow along the same lines. In fact, in the business writing and discussions that I’ve encountered, very rarely if ever have I noticed even the suggestion that a corporate “governance model” and a national government might have deep and important similarities.

In fact, the true genius of capitalism from a human-development standpoint was that it decoupled and abstracted political and economic realities. What were formerly struggles between nation-states (consider Machiavelli’s Italy) could now be struggles between nation-corporations, with the toll counted in jobs lost instead of lives lost.

Another impact it had was to more effectively hybridize government, i.e., I am subject to the government of the United States, the particular state and city where I live, and the business for which I work, as well as any other organizations in which I participate. This hybridization makes the world more efficient because each organization can seek the most effective form of government for its activities.

So when I say that most businesses’ governments are totalitarian, oligarchic, and/or socialist, I don’t mean these are negatives. They are simply characteristics that can be properly aligned or misaligned with your organization’s values.

Consider how your organization’s government works. Is it a top-down affair, like a monarchy or an oligarchy? Are there democratic features, and are they really democratic or are you just pacifying the people to keep them from revolting? Who wields the practical power within your organization? And how is your Constitution holding up? Have you added features (like an Innovation Department or a Chief Happiness Officer) instead of revamping your system to fit your present values?

Forward-looking businesses will have to leapfrog the development of world governments in order to keep pace with the future. They will have to skip from where they are (perhaps a little ahead of feudalism) to a post-democratic solution.

Fortunately, we’re starting to get a handle on how such governments work. Frederic Laloux has a great lecture (with Q&A) on the priorities and operations of forward-looking organizations. I have a few things to add, as you will see later this week, but please speak up in the comments about your own experiences with forward-looking governments.

Writing Your Founding Myth

Yesterday we examined the existing story of your organization. Today we’re going to explore how we can nudge that story into place to create a founding myth–the story that underlies the identity of any company, nation, team, or collective.

As much as Americans may disagree about the particulars, most of us have a shared respect for our founders and place emphasis on the values of liberty and equality. Today, this story includes the long fight to end slavery and grant equal rights to minorities. This is our founding myth: a particular telling of our history, with emphasis on the values that form our identity and the heroes who championed those values.

A large chunk of the Hebrew Bible contains what could be called Davidic mythology: from foretelling David’s kingship long before his birth, to calling upon his bloodline well after his death. The patron, YHWH, brought the people out of Egypt and into a new land, established the identity and values of the culture, and provided a model and hero in the form of King David. This myth sustained the identity of Israel and the Jewish people through multiple exiles, through Greek and then Roman occupations.

As you can tell from my short telling of these two stories, founding myths have important characteristics that help to shape a community:

  1. Shared origins. Your shared origins might stretch back to the founding of the organization, particularly if it was founded last week or last year. Or it might only stretch back to a particular turn in the organization’s history. I began working at KPMG in 2005, shortly after a tax-shelter scandal that resulted in a deferred prosecution agreement with the government. The narrative at the time hinged on that event: we were going to become the firm with the most integrity and the highest-quality work. Sure, we could have traced our origins to the 1800s and the four partners that make up the letters of the name, but that wasn’t the story we were telling; that wasn’t the firm we were trying to be. Our story was of a new beginning, of a murky past and a better future.
  2. Shared values. It’s no coincidence that the greatest philosophers, scholars, and scientists of ancient Greece lived and worked in Athens, the city of Athena. Out of all possible patron gods, its founders chose the goddess of wisdom–not the god of war to have a powerful military, the goddess of fertility to have abundant farmland, or the god of the forge to have unparalleled industry. The story of Athens defined the city’s key value, and elevated that value above many other perfectly good values. If you lead an organization, I urge you to pick one value above all others that is of special importance to this group of people. Then make sure it is embodied in your founding myth.
  3. Shared destiny. It’s never enough to simply share a past. In order to build a community, people have to believe in a shared future that follows from that past. Your shared destiny is the natural result of the values that call you out of your origins; the message is that all that is needed for you to go from where you were to this bright future is to embody your values. Often this destiny is something you know can be achieved because in your founding myth it has been achieved before: George Washington’s presidency, David’s kingship, Steve Jobs’ release of the iPhone. But if your organization is too new to have past successes, or if you’re overseeing a major shift in culture and values, focus on the promise of the future you are trying to achieve.

Through all of these, the operative word is “shared.” You can’t dictate a new future from on high; it has to be something that each person in your organization can believe, a destiny and a set of values that each individual wants to execute. Be aware that this may also be a way to cull your membership; those who aren’t interested in being a part of your shared story may not belong in your community.

Of course, the one thing this story is missing is a character. The character is a champion. The story isn’t about the champion–not really–but the champion breathes life into the ideas. She emerges from the shared past (like everyone else), embodies the shared values (like everyone can), and creates a shared destiny (by virtue of her embodiment of those values).

George Washington was a simple land owner who embodied the values of liberty and equality, led the military forces of rebellion, and eventually became the first President of the United States. David was a humble shepherd who embodied the values of piety and wisdom, overcame both the Philistines and the forces of Saul, and became the first in a long line of kings. Neither of these men were perfect even in the myths–in fact, being an ordinary, flawed human being is important. But because they embodied the shared values, they brought about a bright destiny for all their people.

You might in fact be the champion of your organization’s founding myth, like Jack Welch was at GE. But the myth isn’t about you, it’s about the collective identity.

Once you’ve laid out what you want your founding myth to be, you will need people to buy into it. But recognize that your founding myth is what the people in your organization believe it is. It’s the story they tell, not the story you tell. The closer your myth is to the story people are already telling, the better you will be able to convince them. But remain open to the possibility that your story will need to go through several revisions before everyone’s on the same page.

Discovering Your Current Story

It’s imprudent to write a completely new story for your organization without first discovering what your current story is.

“Wait,” you say. “My organization already has a story?”

Yes, O dear reader! Everyone in your organization, whether it’s two people or twenty thousand, is telling a story about it.

I’m not going to get into methodology. You could survey the members of your organization, you could bring them in and ask them, you could start a discussion thread. You might ask your clients or customers, or you might keep it within your business. But the questions you will need to answer are generally the same.

  1. What do people believe are the most important values of my organization? (Not just the words in our on-boarding materials, but the values they are expected to play out on a daily basis in every interaction.)
  2. What does my org value that distinguishes it from any similar organization? Why does it hold that value as important?
  3. Do my org’s people know why and how they are expected to embody those values? Can they tell the story of a hero or champion of my org’s values?
  4. Where do my org’s people expect the company to be in five or ten years? How does that image reflect the distinguishing values of my org?
  5. What role do they see themselves playing in the evolution of the org?
  6. Where do my people expect to be in five to ten years? What does that say about their individual values?
  7. What role do they see the org playing in their personal evolution?

At its core, these questions seek to get to the “why” of your organization and identify the story your people are telling themselves about it.

Once you have answered these questions, start to piece together the puzzle:

  • Where do my people believe my organization is coming from? In other words, what is the relevant historical context?
  • What values are calling my organization toward a different future? How are those values shaping the organization as it is today? (Remember values don’t always have positive effects–cost-efficiency may result in fear and territorialism, while innovativeness may result in inefficiency. What are the benefits and the costs, not just to the organization as a whole but to my people?)
  • Who is the champion of these values, the example my people think of when they are trying to decide how to execute the values of the organization?
  • What kind of future is this leading us into? Is the path leading upward, downward, or on the same level? What specifics can I glean about the future my people are working toward?

With these elements in place, you will have the most basic outline of your founding myth. The next step will be to reforge that myth into something better.

Get Rid of Your Employees

For the past few hundred years, employees have been a pretty great thing to have. But that’s all over now. Employees just aren’t useful anymore.

You see, during the Industrial Revolution, we developed a massive machine that was capable of making other machines. And all the machines we made were ultimately made of people. They were rough approximations of things that we would do if we had the right kind of machine power. Employees were educated in things like handwriting and arithmetic so that they could be parts of these machines, these massive–what will we call them?–computers!

A couple centuries later, we finally have on the horizon what we really wanted this whole time: Machines that could do all our machine work for us. So we no longer need employees. What we need today is partners.

And that’s why you’re going to get rid of all your employees. Because instead, these people who were once pieces of a machine will become the people who scheme new machines and new businesses and new and better ways of doing things. They will be the ones to introduce new ideas and new perspectives.

This is what our workforce is becoming: a superpower of humanity, unchained from the need to keep up the drudgery of machine work. You will see your former employees bringing value to the table that neither you nor they at one point thought was possible.

This isn’t the distant future. This is happening now. Today. And it entails bigger changes than many people realize. But it is also bright with possibility and the hope of a healthier world.